KUALA LUMPUR, July 8: Malaysian crude palm oil futures dropped 1.7 per cent further on Tuesday as fears of a build-up in stocks and declining soya oil prices depressed the market.

The benchmark September contract on the Bursa Malaysia Derivatives Exchange settled down 58 ringgit to 3,454 ringgit ($1,060) per ton after diving more than 3 per cent the previous day.

Good weather for U.S. soy may see a build-up in stocks from historically low levels and along with Malaysia’s own record levels of stocks for June, markets will be pressured to go lower, said a trader with a foreign brokerage.

But this might just be the right time to buy in terms of food demand for festivals in September and even for the biodiesel industry, he added.

Dealers said weakening prices of palm oil revived biodiesel hopes for the commodity, especially with crude oil hitting successive record highs.

Other traded months fell between 34 and 70 ringgit.

Overall traded volumes rose to 12,710 lots of 25 tons each from the usual 10,000 lots.

Malaysia’s end-June palm oil stocks are likely to touch 2.1 million tons from 1.9 million at end-May because of slowing demand in the last few months.

Traders in Malaysia and Indonesia expect overseas demand for palm oil from China, India and the Middle East countries to pick up in July, as buyers tend to stock up at least two months before the Asian festival season that begins in early September.

Although some demand could come from the biodiesel sector, Malaysia and Indonesia’s fledgling alternative fuels industry has been, in recent months, hampered by sky-high prices of palm oil, which is also used in hundreds of food products.

In Malaysia’s physical market, crude palm oil for July shipment in the southern region was quoted at 3,460/3,470 ringgit a ton. Trades were done at 3,460 ringgit per ton.—Reuters